Summary
Hansen Natural Corporation (now Monster Beverage Corp.) reported a decrease in net sales and net income for the first quarter of 2010 compared to the same period in 2009. This decline was primarily attributed to 'Advance Purchases' made by customers in the fourth quarter of 2009, anticipating a new marketing contribution program and a transition to a new ERP system. Despite the revenue dip, case sales volume actually increased by 3.1%. The company's DSD (Direct Store Delivery) segment, which includes energy drinks, remained the dominant revenue driver, accounting for over 90% of net sales. Operating expenses increased significantly, impacting profitability. A notable point of concern for investors is the company's substantial investment portfolio, which includes a significant portion in auction rate securities (ARS). While the company has a put option for a portion of these ARS, the auctions for these securities have failed, leading to impairments and classification as trading securities. Management stated that despite the illiquidity of some investments, it does not anticipate a material impact on overall liquidity or working capital, but acknowledged the potential for further impairments.
Financial Highlights
25 data points| Revenue | $238.11M |
| Cost of Revenue | $113.56M |
| Gross Profit | $124.55M |
| Operating Expenses | $73.77M |
| Operating Income | $50.78M |
| Net Income | $32.56M |
| EPS (Basic) | $0.03 |
| EPS (Diluted) | $0.03 |
| Shares Outstanding (Basic) | 1.06B |
| Shares Outstanding (Diluted) | 1.12B |
Key Highlights
- 1Net sales for Q1 2010 decreased by 2.5% to $238.1 million, compared to $244.2 million in Q1 2009, largely due to customer inventory build-up in the prior quarter.
- 2Net income decreased by 21.7% to $32.6 million ($0.35 per diluted share) in Q1 2010 from $41.6 million ($0.44 per diluted share) in Q1 2009.
- 3Case sales volume (in 192-ounce case equivalents) increased by 3.1% to 24.2 million cases, though the average price per case decreased by 5.5% to $9.84.
- 4Operating expenses rose by 14.5% to $73.8 million, driven by increased payroll, sponsorships, endorsements, and professional service fees.
- 5The company holds significant investments in auction rate securities (ARS), with $92.7 million face value as of March 31, 2010. Failed auctions have led to impairments and reclassification of a portion to trading securities.
- 6Cash flow from operating activities significantly improved to $68.0 million in Q1 2010, a substantial turnaround from negative $3.7 million in Q1 2009.
- 7The DSD segment, primarily energy drinks, continues to be the core business, representing 91.2% of net sales in Q1 2010.